China launches global tax audit on super-rich to recover billions

China has launched a global crackdown on its super-rich to collect hundreds of billions of dollars in unpaid taxes dating back decades, seeking to narrow income and wealth inequality and close a deepening budget deficit.

Authorities have intensified their scrutiny of overseas capital gains and investments, with investigations extending in some instances as far back as 2000. The campaign comes as Beijing attempts to significantly expand its oversight of outbound capital flows.

According to foreign officials, Chinese bankers, and family office executives who spoke to the Financial Times, Chinese banks and other financial institutions have been instructed to review the overseas investments of wealthy Chinese nationals and check whether the resulting income has been declared to tax authorities in Beijing.

The efforts, which form part of sweeping tax reforms targeting the country’s wealthy elite and offshore trusts, focus on gains derived from the acquisition of assets such as real estate, equities, precious metals, and cryptocurrencies.

Numerous officials, bankers, and advisers confirmed the retrospective nature of the campaign, noting that inquiries cover periods reaching back more than 25 years in certain cases.

A banker in southern China said that in recent months, Chinese banks have increasingly coordinated with tax authorities to freeze the accounts of wealthy clients until officials are satisfied that taxes on capital gains from overseas assets, accounts, and trusts have been paid.

“In standard practice, these wealthy individuals immediately pay the penalties and taxes in cash to get their accounts unfrozen,” the banker said.

The timeframes examined in the tax audits appear to vary significantly. For instance, an executive at a Shenzhen-based family office said clients were asked to pay taxes on gains generated from overseas assets between 2017 and 2022. No explanation was provided as to why that specific period was targeted.

Victor Shih, a professor of Chinese political economy at the University of California, San Diego, said the motivation behind the new campaign was “clearly rooted in fiscal reasons.”

China’s fiscal revenues, where taxes plug a critical gap, have largely stagnated since the pandemic and contracted by 1.7% in 2025 to 21.6 trillion yuan, or $3.2 trillion. Total public revenue from land sales, once a primary source of state income, fell to 4.15 trillion yuan following a real estate market downturn, down from a peak of 8.7 trillion yuan in 2021.

Last month, China also enacted comprehensive tax rules governing assets transferred to offshore trusts. According to a joint statement by China’s Ministry of Finance and the State Taxation Administration, the regulation closed a legal loophole long utilized by wealthy individuals to protect their assets abroad.

Under the new rules, income generated from offshore trusts will be subject to a 20% tax across multiple stages.

A Singapore-based banker who manages overseas assets for wealthy Chinese nationals said the offshore trust tax “shocked” clients.

“There are people who established trusts for public assets, such as shares in listed companies. During periods when initial public offerings were very common, holding the right trust structure provided protection regarding income tax. This new decision has eliminated that advantage,” the banker said.

While experts suggest that some complex overseas structures may evade the new rules, many trust holders are expected to face a one-off tax liability. Reports indicate that some may be forced to sell assets to meet the payments.

Together with other tax reforms, the new policies will align China’s taxation system more closely with that of the US, where American taxpayers are generally taxed on their worldwide income.

Ye Yongqing, a Shanghai-based tax lawyer and partner at Anli Partners, said, “Regulatory bodies have steadily tightened oversight of cross-border capital flows, declarations of overseas income, and foreign exchange transactions. Consequently, the scope for wealthy Chinese to transfer assets abroad or structure their tax affairs through offshore vehicles has narrowed.”

Ye noted that Beijing has adopted a restrictive approach toward offshore trusts similar to US tax legislation, broadly rejecting attempts by taxpayers to use these vehicles to defer or entirely eliminate tax.

There are also indications that stricter tax collection from China’s wealthy has yielded results in recent years. Official data shows that personal income tax revenues rose 11.5% in 2025, driven by the impact of previous campaigns, including the taxation of Hong Kong stock transactions. This growth rate significantly outpaced the 0.8% expansion in overall tax revenues.

An executive at an immigration firm with offices in China and New York said authorities initially targeted wealthy Chinese trading US equities via Hong Kong or other overseas channels.

The executive said the inquiries are expected to expand next to individuals holding substantial financial assets in overseas bank accounts, particularly in Hong Kong, and ultimately to other forms of offshore wealth, including real estate.